Your credit is one of many financial factors affecting the mortgage interest rate and loan products you may qualify for. If you’re part of the 38 percent of American’s likely to purchase a home in 2021*, you may want to make sure your credit score is in good shape before you plan to purchase a home of your very own.
If your score could use a little work, we’ve got six ways that could improve your credit score.
How Could You Improve Your Credit Score?
How you improve your credit score ultimately comes down to when (and how often) a creditor reports your account and payment activity, including payments, new account opening/closings, credit usage and credit inquiries.
While there is no universal formula or schedule credit reporting agencies use to update your financial information, TransUnion claims to update credit reports every 30 to 45 days. In contrast, Credit Karma claims to update Equifax credit report information as often as once a week.
What Key Factors Impact My Credit Score?
One way to potentially improve your credit score is knowing exactly what’s holding it back or dragging it down. The five factors below are based on the most recognized scoring model, FICO®. They are broken down into percentages used to calculate your overall credit score, along with some helpful tips.
- Payment History (35%): Your bill payment habits.
Helpful Tip: Paying all bills on time, early and multiple times per month. Also, paying more than the minimum required amount.
- Credit Utilization (30%): How much debt you carry in total and how much of your available credit is utilized.
Helpful Tip: Utilizing 30 percent or less of your total credit limit.
- Credit History (15%): Age of credit cards and accounts.
Helpful Tip: Keep older credit lines open to substantiate credit account history.
- Credit Use/Account Mix (10%): The blend of credit accounts you have, including credit cards and loans.
Helpful Tip: Keep older credit lines open to substantiate your credit account mix.
- New Credit (10%): New credit inquiries, including credit cards, personal or mortgage loans, auto loans and in-store financing. Too many new credit inquiries could negatively impact your credit score and no new credit inquiries might help.
Four Ways You Could Improve Credit Score
- Make Extra Monthly Payments
- Avoid Closing Older Accounts or Opening New Accounts
- Dispute Fraudulent Charges, Errors and Accounts in Collections
- Report TV and Streaming Subscriptions
Building good credit doesn’t happen overnight, but it could happen by taking small, consistent steps in the right direction. Whether you are a potential first-time homebuyer learning how to improve your credit score so you can make your first home purchase or simply need the credit score boosting tips to build good credit over time or in a shorter time, Wyndham Capital is here with the helpful insight.
Contact WCM today for helpful answers to your mortgage questions or to speak with a WCM loan officer about starting your home loan journey